When tax season comes along each year, the IRS releases updates to protect taxpayers against potential fraud. Fraudsters constantly update their tactics to steal personal information, usually by posing as legitimate organizations or trusted individuals. Here are five tax season scams to be aware of while filing your taxes before April 15.
“Ghost” Tax Preparers
One of the new tax scams identified by the IRS involves a scammer posing as a tax preparer. They will falsify information on a tax form to inflate the refund, but refuse to sign for their work as required by law. “You could be on the hook for false information on your tax form if they convince you to sign it,” says Paris Davis, senior vice president and northwest Arizona retail division manager at WaFd Bank.
Not only will the scammer keep the fee paid for the tax preparation service, but they will have the taxpayer’s confidential information to use in future frauds. Davis says the best defense is to know who you’re working with.
“Get a referral from a friend or family member before you start releasing your vital confidential information like your social security number. And if a tax preparer refuses to sign their name, ask yourself if you want to do business with someone who won’t stand behind their work.”
Threatening Phone Calls
Fraudsters will try to scare people through bogus phone calls claiming to be the IRS and demanding the immediate payment of a fake tax bill. They will threaten arrest or additional fines if the target doesn’t comply.
“Once, I got a voicemail message claiming they were the IRS and that I owed back taxes. First of all, I knew that wasn’t true, and secondly, the IRS doesn’t call. They will send a notification in the mail because they have to have paper documentation of it,” says Davis. “So if you get calls like that, block the phone number and ignore them.” Not only does the IRS correspond solely through the mail, but they will never threaten arrest, deportation, or ask for financial information over the phone.
Email phishing is a popular scam where fraudsters create convincing fake emails and send them to thousands of people. Sometimes these emails pose as organizations like the IRS to coax financial information out of a target or get them to download a harmful computer virus.
“They may copy my email, but spell Paris with an extra “R” to fool people. The change in an email address can be so minute. Stop and think before you click on a link or download an attachment,” says Davis. Just like the IRS won’t call, they won’t initiate correspondence through email.
Social Media Scams
Where email phishing campaigns are typically sent out by the thousands in hopes that just a few people will fall prey, scammers will use social media to target specific individuals. A fraudster will gain access to a social media profile — or create a convincing fake — and contact friends and family members asking for financial information.
“Know who you’re talking to. Ask yourself, is this an exchange that I would normally have with this person, whether it’s your brother, sister or friend? If you’re unsure, pick up the phone and ask them,” says Davis.
Fraudsters manipulate people by playing on their emotions, especially the desire to help others in need. Sometimes criminals will pretend to be a reputable charity asking for money, saying that the donation is tax deductible but needs to happen right then and there.
“I do nonprofit work with Central Arizona Shelter Service. They have telethons where you call in to make your donation, not the other way around,” says Davis. “If you ever get a phone call from someone claiming that they’re only taking donations until 8 p.m., they’re lying. Reputable nonprofits take donations all day, every day.”
The best way to protect against tax scams is to be vigilant with any personal financial information, especially tax information. “Your taxes are your financial portfolio, your history. Treat them cautiously, and don’t share an open book of your finances with people you don’t know,” says Davis.
Fraudsters use these scams because they work. Davis suggests relying on intuition if something feels off in a situation. “If you have a moment of pause, reach out to your banker. They can help guide you whether you need to file a report with the Attorney General or the local authorities,” says Davis. “For the most part people are good, but there are those out there looking to take advantage of others. That’s what we need to protect ourselves from.”